Includes Video: Barclays Africa to acquire Egypt, Zim ops from Parent company

 

by Renee Bonorchis

Barclays Africa 3 month graph
Barclays Africa 3 month graph

(Bloomberg) – Barclays Africa Group Ltd. said talks to buy its parent company’s operations in Egypt and Zimbabwe have been accelerated following management changes at Barclays Plc.

“Our ambition is to do the acquisition of both, and the management changes have confirmed that that ambition will be realized,” Maria Ramos, chief executive officer of the Johannesburg-based lender, said Wednesday on a conference call. Barclays Executive Chairman John McFarlane “came to South Africa very shortly after his appointment and there’s very firm support for the Africa business,” she said.

McFarlane fired Barclays CEO Antony Jenkins this month and took control, saying he will boost revenue and double the share price over the next three to four years. Planned job cuts haven’t targeted the African operations, where the bank is seeking to expand in economies offering faster growth than more developed countries.

Barclays Africa is awaiting license approvals in Nigeria where it so far has a representative office for its corporate and investment bank. Expansion in Africa’s largest economy will be “organic,” Ramos said.

First-half profit climbed 9.8 percent to R6.77 billion ($539 million) in the six months through June after retail and business banking earnings rose, bad debts declined and it expanded African operations, the bank said in a statement on Wednesday. Earnings from the rest of the continent climbed by 22 percent, more than twice the pace of the 8 percent gain in South Africa.

Forex Probe

Diluted earnings per share excluding one-time items increased 11 percent to R7.97 and the bank declared an interim dividend of R4.50 per share, a 13 percent increase from the year before. The stock dropped 0.5 percent to R185.84 by 9:24 a.m. in Johannesburg. The local benchmark banking index was 0.3 percent lower.

Barclays Africa was named in May as among banks being investigated by South Africa’s Competition Commission for manipulating trading in the rand.

“We’ve had nothing from the Commission on this matter,” Ramos said, declining to comment further.

Barclays Africa is part of a group of banks working together to support loss-making South African clothing retailer Edcon Holdings Ltd., Ramos said. The lender has financial ties to Edcon through its private equity portfolio, through loans to the retailer and because of its ownership of Edcon’s 8 billion rand store-card business.

If Edcon were to fail, the card debt would become a collections book, Ramos said. Losses realized because of Edcon in the first six months weren’t “material,” she said.

In the next six months, Barclays Africa expects its net interest margin to widen “slightly” from 2014, it said in the statement. The bank foresees mid-single digit loan growth, with lending in corporate and investment banking increasing faster than retail and business banking.

Barclays Africa Media Release

Barclays Africa delivers strong half year performance as strategy gains momentum

Salient features

  • Diluted headline earnings per share (HEPS) increased 11% to 797 cents.
  • Declared a dividend per share (DPS) of 450 cents, up 13%.
  • Rest of Africa headline earnings grew 22% to R1.2bn and South Africa rose 8% to R5,5bn.
  • Return on equity (RoE) improved to 16,4% from 16,1%.
  • Pre-provision profit increased 7% to R14,3bn
  • Revenue grew 6% to R32,4bn, as net interest income increased 7% and non-interest income rose 4%, while operating expenses grew 5% to R18,1bn.
  • Credit impairments fell 1% to R3,6bn, resulting in a 1,11% credit loss ratio from 1,18%.
  • Barclays Africa Group Limited’s core equity tier 1 (CET 1) capital ratio of 11,7% remains above regulatory requirements and our board target range.

Barclays Africa Group Limited (‘Barclays Africa’ or ‘the Group’) today announced an 11% increase in headline earnings for the six months ended 30 June 2015 and remains firmly on track to deliver on its three year strategic priorities and market commitments.

Driven by a 7% increase in pre-provision profit to R14,3 billion, the Group’s headline earnings increased to R6,8 billion from R 6,1 billion, largely due to strong growth in Retail and Business Banking (RBB) on the back of customer growth.  Barclays Africa declared an ordinary dividend per share of 450 cents, a 13% increase, given our strong capital levels and internal capital generation capacity.

Maria Ramos Copyright World Economic Forum www.weforum.org / Eric Miller emiller@iafrica.com
Maria Ramos Barclays Africa CEO. Copyright World Economic Forum www.weforum.org / Eric Miller [email protected]

Maria Ramos, Chief Executive of Barclays Africa Group Limited says: “Our growth strategy is now half way through a three year journey and these results demonstrate that it is working. We have done what we said we would by delivering a strong performance driven primarily by the turnaround of Retail and Business Banking. Through targeted growth and cost reduction, we are successfully growing in our chosen areas.”

RBB’s turnaround continues to gain momentum, with strong headline earnings growth of 17% to R4,7 billion, largely due to a strong operational performance led by Home Loans, growing customer numbers and 14% higher non-interest income in Business Banking. This was complimented by focused cost management and lower credit impairments. Our investment in digital technology, innovation and new, state-of-the-art branches is already paying dividends. The transformation of the customer experience has seen the Retail Bank gain almost half a million customers during the half, while internet banking users increased 17% and banking volumes through the Absa App more than doubled.

Excluding negative revaluations in its non-core private equity portfolio, Corporate and Investment Bank’s headline earnings grew 9%, driven by a 30% increase in Corporate earnings and 58% higher Markets earnings outside South Africa. The Corporate business outside South Africa was impacted by higher impairments and lower than anticipated loan book growth. An important driver of future growth across the continent will be the continued roll-out of Barclays.net, the Group’s integrated transactional banking platform. Forex revenues from outside South Africa exceeded those earned in South Africa for the first time.

Headline earnings from Wealth, Investment Management and Insurance (WIMI) increased 14% to R751 million driven by geographic expansion, improved short-term insurance margins and growth in fiduciary services. The business outside South Africa continues to expand with headline earnings growth of 76%. We have established additional presence in East Africa following the acquisition of First Assurance. The Wealth and Investment Management business has seen strong institutional flows with a R9 billion increase in assets under management.

We closed our Barclays Africa acquisition almost two years ago to the day. Our portfolio outside South Africa grew headline earnings 22% and 26% in constant currency (8% in SA). The revenue momentum has started to improve with 12% constant currency growth and all operations achieved positive JAWS improving the cost-to-income ratio to 60%. We expect this trend to continue and while our attention will remain firmly on South Africa, we will invest in our other key markets to accelerate the growth opportunity across the continent.

The Group’s earnings remain well diversified by business and product line. RBB accounted for 63.4% of headline earnings (excluding head office), while CIB contributed 26.4% and WIMI 10.2%.

Maria Ramos concludes: “Our strategy is based on the strength of our franchise – an African bank that is fully local, fully regional and fully international. These results demonstrate that we are on track to achieve the commitments we have made. I remain excited by the potential for our business across the continent.”

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